The biggest news this week was definitely China's ICO ban. On Monday, the Chinese government ordered the suspension of all ICOs conducted by Chinese companies to put an end to ICO scams in China's unregulated ICO market.
The ban affects all Chinese companies conducting ICOs and managing ICO fundraising platforms in China. Interestingly, the ban does not stop Chinese citizens from participating in foreign ICOs. The official notice only mentions that “the public needs to stay aware of the risks of coin offering fundraising and trading”.
The news created a lot of FUD (fear, uncertainty, and doubt) in the crypto market. As a result, Bitcoin prices dropped 8% to around $4,300 while Ether prices dropped 16% to around $300 from the previous week. Cryptocurrencies originating from China were hit particularly hard. NEO, for example, tumbled 28% from the previous week to around $23.
Amid all the fear, we need to put things in perspective. China has tried to restrict cryptocurrencies before. This is not something new and yet cryptocurrencies have been able to bounce back every time after a China crackdown.
Moreover, the Chinese government’s concerns do have its merits. In the last few weeks before the Chinese ICO ban, more and more people were asking for our opinion in Chinese ICOs because they were hot. This was an indication that people were getting greedier and were willing to invest in things that they were not familiar with.
Having worked in Asia for several years, I know there are a lot of scams out there and that is why I have largely avoided reviewing Chinese ICOs. The only Chinese ICO I was comfortable enough to write about and recommend was Red Pulse.
There's a lot of speculation going on right now but no one really knows what the Chinese government will do. It's always good to think about the worst case scenario, which we believe would be China banning cryptocurrency trading entirely.
But keep this in mind - China was not able to do that when the cryptocurrency market was much smaller so we think it would be hard for them to enforce a ban effectively now when the market has grown substantially. It is also a lot more difficult to ban decentralized vehicles like cryptocurrency.
Facebook and Google are also banned from China and they are doing just fine. The fact that China has decided to ban ICOs indicates to me that it is a legitimate thing that China is worried about, and not just a fad.
Having considered the above, I personally would not worry too much now. If you have a heavy exposure in Chinese cryptocurrencies, you may want to consider adjusting your portfolio to reduce your overall risk profile.
Developments in the Cryptocurrency World
China bans companies from raising money through ICOs: https://www.cnbc.com/2017/09/04/chinese-icos-china-bans-fundraising-through-initial-coin-offerings-report-says.html
Korea financial authorities to strengthen regulations on digital currency trading: http://www.businesskorea.co.kr/english/news/money/19180-regulating-bitcoin-trading-financial-authorities-strengthen-regulations-digital
Cryptocurrency exchange Coinbase hits 10 million users: https://www.cryptocoinsnews.com/bitcoin-exchange-coinbase-hits-10-million-users/
Dubai property project allows payment in Bitcoin: http://uk.businessinsider.com/ultimo-founder-michelle-mone-selling-250-million-dubai-apartments-in-bitcoin-2017-9
US Congress introduces Cryptocurrency Tax Fairness Act which exempts transactions under $600 from report capital gains: https://coincenter.org/entry/reps-polis-schweikert-introduce-cryptocurrency-tax-fairness-act-in-congress
European Union is joining UN to help refugees using Ethereum technology: http://www.altcointoday.com/european-union-is-joining-un-to-help-refugees-using-ethereum/
Raiden Testnet for Ethereum launched: https://github.com/raiden-network/raiden/issues/648
Vitalik Buterin is now in the process of crafting three white papers explaining Casper: https://www.coindesk.com/ethereum-seeing-ghosts-vitalik-buterin-is-finally-formalizing-ethereums-casper-upgrade/
Blockchain Enterprise firms R3 and Ripple sue each other over $1 billion of cryptocurrency: https://www.forbes.com/sites/laurashin/2017/09/08/blockchain-enterprise-firms-r3-and-ripple-sue-each-other-over-1-billion-of-cryptocurrency/#1730aa0f4289